3 Significant Insurance Trends from 2019 That Are Gaining Even More Traction in 2020
2019 was a year of great opportunities and challenges in the insurance industry.
While several significant trends impacted insurance in 2019, three in particular are likely to gain even more traction in 2020.
First, the impact of technology was widespread, leading to improved efficiencies and automated risk making decisions. Second, we observed a great level of discipline from carriers in prioritizing profitability and return on capital as they shed lines of business that no longer benefited the bottom line. Third, we saw the tremendous implications of social inflation on claim costs.
What did these trends mean in 2019, and how will they play out in 2020?
1) The Impact of Technology
In 2019, we continued to see how technology is reinventing the insurance industry as we know it.
In fact, investment in technology reached a new high in the past year. There is no question that technology is changing the way that we interact with our customers, spurring new innovation and entrepreneurship and enabling us to leverage data to identify and calculate risks with greater accuracy than ever before.
At Argo, we have spent years investing in technologies and recruiting diverse tech talent to truly change the way we conduct business. Throughout the past year, we have seen how this investment enables us to drive a superior customer experience. We’re focused on providing the “right touch” offering, which means we provide the exact level of underwriting by leveraging data and analytics to make timely and efficient decisions about risks.
While the implementation of new technological tools has been slower to impact traditional property & casualty lines (outside of homeowners and auto), I believe this will change in the year ahead. The ripple effect of advanced technology will widen in 2020, and companies that don’t incorporate technology into their business will be left behind.
2) Bottom Line Focus and Rate Increases
In the past year, carriers were more disciplined and focused on return on capital and profitability. This level of underwriting discipline is widespread and likely to remain so for the near term.
Unlike previous years, carriers aren’t clinging to unprofitable business. Instead, they shed poor risks and portfolios where they were unable to achieve the necessary return on allocated capital. This allowed companies like Argo to put more focus on their core lines of expertise and move both capital and talent to these lines.
These changes result in noticeable customer service differentiation for our clients.
The persistence of the hardening rate environment was also noteworthy. Property rate increases were consistent across the majority of product lines, while casualty and specialty lines saw steady rate increases throughout the year.
It is very likely that these favorable market conditions and momentum in positive rates will carry forward in 2020.
2019 taught us that clients and policyholders will pay for value if it can be successfully articulated on a consistent basis and made tangible and real in the eyes of the customer. If carriers can continue to provide this value, they will be rewarded with well-priced and renewal business, underwriting profits and improved return on capital.
3) Uptick in Social Inflation
Perhaps one of the most surprising trends of the last year is the rapid pace at which social inflation is affecting the insurance industry.
As The Insurance Information Institute puts it, social inflation is a term used to describe “rising litigation costs and their impact on insurers’ claim payouts, loss ratios, and, ultimately, how much policyholders pay for coverage.”
Throughout 2019, social inflation has accelerated as juries hand out larger claim payouts than ever before. The Financial Times predicts that social inflation could ultimately lead to a $200 billion hole in global reserves.
While the issue of social inflation used to be reserved as a major concern for personal insurance companies, it is increasingly impacting other property & casualty business lines, including management liability and professional lines.
It is likely that this issue will continue, and even worsen, in 2020, so carriers must be properly prepared.
Looking Ahead — 2020’s Opportunities
While the insurance industry certainly has challenges to overcome in 2020, we also see opportunities for a successful new decade for those willing to innovate and evolve.
I believe the insurance companies that will succeed in 2020 are the ones that are planning for challenges such as social inflation, that proactively invest in the technologies and talent of tomorrow and that double down on the most profitable aspects of their business.
Companies that are willing to keep up with the pace of change and focus on profitable business and best-in-class customer service, rather than cling to what’s worked in the past, will pave the way for the next generation of insurance. &